Megan Ellison's Big Hollywood Gamble: a Movie Studio for Grown-Upgrades

By Ben Fritz Features Dow Jones Newswires

Hollywood's newest studio doesn't operate out of a majestic multiacre lot or a sleek office tower but an unmarked former art gallery whose lobby is decorated with thousands of VHS tapes arranged in a giant "A."

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Megan Ellison's Annapurna Pictures has a distinct vibe that isn't imposing like Twentieth Century Fox or Universal Pictures, nor high-tech like Netflix Inc. or Amazon.com Inc. Like its social media savvy millennial founder, Annapurna projects an image that is retro, artistic and bespoke, even as it is investing hundreds of millions of dollars to compete directly against those giant companies and others that dominate Hollywood.

Personally wealthy thanks to her father, billionaire Oracle Corp. co-founder Larry Ellison, the 31-year-old Ms. Ellison has produced and financed several Oscar-nominated pictures in the past five years, including mid-budget adult dramas "Zero Dark Thirty," "Her" and "Foxcatcher."

Until now, though, Annapurna has been a small company whose movies are released by other studios, such as Sony Pictures Entertainment and Viacom Inc.'s Paramount Pictures.

Last year, Ms. Ellison decided she wanted more control over how her movies are released and full credit, as well as full profits, when they succeed, according to people familiar with her thinking. She tripled Annapurna's staff to nearly 120 so it could release and market its own movies, and produce television shows and videogames. The release this weekend of "Detroit," a historical drama from "Zero Dark Thirty" director Kathryn Bigelow, marked the first time Annapurna has distributed and marketed a film itself.

Annapurna's expansion comes as the original, mid-budget movies Ms. Ellison favors are struggling for attention against major studios' superheroes and reboots. At the same time, deep-pocketed Amazon and Netflix have aggressively moved onto Annapurna's turf, raising prices for the hottest indie movie ideas and increasing competition for consumers.

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"The fact that Megan is building an independent outfit and taking the risks she is taking puts her in a pretty singular space," said Dede Gardner, a partner in Brad Pitt's production company, Plan B, that has signed a deal to work on several projects with Annapurna.

Ms. Ellison, who never gives interviews, declined to comment through a spokeswoman.

Privately held Annapurna doesn't share financial results, but it has had a mixed record at the box office. Along with such hits as "Sausage Party" and "American Hustle" have been flops including "Her" and "The Master." Ms. Ellison has been frustrated working with other studios that controlled when her movies were released and how they were advertised, leading her to build those capabilities in-house, said the people close to her.

With "Detroit," Annapurna is using a particularly risky movie to make that leap, and not only because so few adult dramas have succeeded at the box office recently. The $35 million picture about the killing of three African-Americans by police during riots in 1967 is opening near the end of a summer packed with big budget "event" films, known in the industry as "tentpoles." After playing in 20 theaters this weekend, it will be released nationwide Friday against an adaptation of the popular Stephen King book "The Dark Tower."

Annapurna didn't initially intend to release "Detroit" itself. After financing the movie, the company late last year offered it to other Hollywood studios, but was unable to strike a deal. At least two companies passed after concluding its commercial prospects were small, according to people at studios who evaluated the film.

Early reviews for "Detroit" have been positive.

"This is the kind of movie Hollywood used to make on a regular basis, but the industry [now] relies on mega-mega-tentpoles that sell in China, " said "Detroit" writer and producer Mark Boal. "Megan has a different business model."

Focus Features, part of Comcast Corp.'s Universal, and Fox Searchlight, part of 21st Century Fox Inc.'s Twentieth Century Fox, are the two remaining studio labels making low- to mid-budget adult movies, similar to Annapurna. Other major studios like Walt Disney Co., Viacom Inc.'s Paramoun Pictures and Time Warner Inc.'s Warner Bros. have exited that segment of the business after sustaining losses.

Netflix and Amazon, meanwhile, are betting big. They have bid the prices for hot pictures at festivals such as Sundance so high that Focus and Fox Searchlight have pulled back on acquiring finished films, once a key part of their business. Now, both primarily produce movies themselves and look to develop long-term relationships with filmmakers, said people close to those companies.

Amazon, which has previously relied on partners like Lions Gate Entertainment Corp. to release movies it acquires, such as this summer's hit "The Big Sick," plans to release its own films starting with Woody Allen's "Wonder Wheel" in December. That will make it an even more formidable competitor.

To build her company into a fully functioning studio, Ms. Ellison has made high-profile hires, including a former head of marketing at Fox and Sony as Annapurna's president, a veteran of Weinstein Co. to run distribution and a former programming chief at HBO to oversee TV.

They work in the studio's offices, a former gallery and several adjoining buildings in West Hollywood, Calif., that a company controlled by Ms. Ellison bought for roughly $35 million last year, according to property records.

Annapurna also has signed deals with companies that will release its movies outside the U.S. and with Hulu, which will be their first home on television, providing guaranteed money that reduces the risk on its productions.

To sustain its overhead, Annapurna will release roughly eight films a year, including some from other companies that aren't auteur-made indies, such as a remake of "Death Wish," starring Bruce Willis, from Metro-Goldwyn-Mayer Inc.

What Annapurna spends its money to make, however, is still largely defined by Ms. Ellison's taste for material and filmmakers, said people who have worked with her. In May, she committed to a biopic of former Vice President Dick Cheney that will star Christian Bale and be directed by "The Big Short"'s Adam McKay. Paramount let it go, concluding the $50 million production was too risky.

"Megan loved the script and Adam, and she didn't pause," said Ms. Gardner, also a producer on the Cheney movie.

Write to Ben Fritz at ben.fritz@wsj.com

(END) Dow Jones Newswires

July 29, 2017 09:42 ET (13:42 GMT)